Employers that misclassify someone as an independent contractor (rather than an employee) face big risks for employee entitlements, withholding tax, superannuation and also unfair dismissals following a Fair Work Australia decision in December.
The Full Bench of the national employment arbitrator found that a purported independent contractor working as a shop assistant in a furniture store was not a contractor, was paid a fixed weekly rate, did not have other clients and was not working through a company.
Unions, the Fair Work Ombudsman and the Tax Office are all cracking down on supposed “sham contracting”. In its decision, the Full Bench identified the following indicia for independent contracting:
+ Whether the putative employer exercises, or has the right to exercise, control over the manner in which the work is performed, place of work, hours of work and the like;
+ Whether the worker performs work for others (or has a genuine and practical entitlement to do so);
+ Whether the worker has a separate place of work or advertises his or her services to the world at large;
+ Whether the worker provides and maintains significant tools or equipment;
+ Whether the work can be delegated or sub contracted;
+ Whether the putative employer has the right to suspend or dismiss the person engaged;
+ Whether the putative employer presents the worker to the world at large as an emanation of the business;
+ Whether income tax is deducted from remuneration paid to the worker;
+ Whether the worker is remunerated by period wage or salary or by reference to completion of tasks;
+ Whether the worker is provided with paid holidays or sick leave;
+ Whether the work involves a profession, trade or distinct calling on the part of the person engaged;
+ Whether the worker creates goodwill or saleable assets in the course of his or her work and;
+ Whether the worker spends a significant portion of his remuneration on business expenses.
If businesses have faulty independent contractor arrangements, they should take action to put the engagement on a proper contracting footing, or alternatively, make employment arrangements.
www.fwa.gov.au/decisionssigned/html/2011fwafb8307.htm, WTB 2012/65
Disclaimer: We believe this information to be correct at the time of publication. It is general in nature, for guidance only and is not intended to be personal advice. It should not be relied upon without obtaining professional advice regarding your direct circumstances. No responsibility can be accepted by any publisher, author, editor, contributor or consultant for loss occasioned directly or indirectly to any person acting or refraining from acting wholly or partly upon or resulting from the material in this publication nor for any error in, broken link or omission from the publication.
© Copyright Andrew Lovett – All rights reserved. No part of this publication may be republished in any form or by any means, electronic, photocopying, recording or otherwise, without written permission.
Comments are closed.